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UITF FAQs
UITF - unit investment trust fund - pooled fund concept - open-ended trust fund - pools together the funds of various investors for investment in different instruments such as ・government securities ・bonds ・commercial papers ・deposit products ・etc open-ended trust fund - fund wherein investors can freely buy and sell units or participation any time subject to the fund's minimum holding period - units are bought and sold at their current net asset value - net asset value is expected to fluctuate daily depending on the prices of the securities held by the fund advantages 1. assured information and guidance because of MTM 2. iron-clad protection for the investor because of accredited 3rd party custodian that take charge of all securities or proofs of ownership of investments 3. ensured fund liquidity at all times because investments are limited to tradable investments or those that can be sold or bought in an organized exchange 4. maximized returns for peso-denominated UITF because this is exempt from reserve requirement 5. investment risks are fully disclosed by the bank 6. ensured transparency ・list of prospective and outstanding investment outlets of the fund are made available to clients at least quarterly ・NAVpu, year-on-year and year-to-date returns are published weekly in a national newspaper ・also available daily via the bank's website market-to-market - considered a more accurate and transparent method of valuation - gives actual value of investments at any given date - consolidated value of instruments held by UITF is determined using prices of said instruments in the secondary market at the close of each banking day - using this info investors can get in and out of the fund at a market value acceptable to them - allows fund manager to take advantage of trading/market opportunities that may arise, thus enhancing potential returns for its investors impact of market-to-market valuation on value of investment - under market-to-market method, value of investment is constantly adjusted based on prevailing market rates ・increasing interest rates → lower present value ・decreasing interest rates → higher present value - if investment is kept up to maturity date, it will end up with a return effectively equal to the yield-to-maturity on acquisition date of the instrument plus the par value of the investment UITF types 1. fixed income fund 2. balanced fund 3. equity fund choose type depending on: 1. financial standing 2. investment goal 3. risk appetite 4. investment horizon fixed income fund - stead income, low risk - T-Bills, FXTNs, premium savings deposits - subtypes: 1. money market fund - short-term, fixed income deposits and securities - portfolio duration: <= 1 year 2. bond fund - portfolio of bonds, other similar fixed-income securities - portfolio furation: > 1 year - subclasses: ・intermediate term: up to 3 years ・medium term: up to 5 years ・long term: > 5 years balanced fund - mix of fixed income and equity - higher return compared to purely fixed income equity fund - stock issues - higher long-term appreciation or growth of capital - more risky than the other 2 how to participate in a UITF / how to redeem investments - acquire units of participation in the UITF at the prevailing price for the day - prevailing price is called: NAVpu Net Asset Value per unit - proceeds = no. of units to redeem x NAVpu for the day evidence of investment in the Fund 1. COP Confirmation of Participation 2. PTA Participating Trust Agreement - documents investor's initial investment/participation how is NAVpu calculated - NAVpu: current net market value of each unit of participation in the fund - (total market value of fund's various investments - total expenses) / number of outstanding units of participation - total expenses consist of fees, taxes and qualified expenses - calculated everyday including holidays - available on PNB website: ・NAVpu ・ROI ・YTD ・YOY is yield guaranteed? - no principal protection - any income or loss of the UITF will be for the account of the investors - even if the yield cannot be guaranteed, you are assured that your hard-earned money is being prudently managed by expert fund managers will there be an indicative yield quoted at the time of investment? - no since m-to-m is used - however, actual yield can be determined by this formula: Actual Yield = Net Income (Loss)/ Principal x 360/No.ofDays x 100 ・Net Income (Loss) = Market Value - Principal ・Market Value = No.of units x NAVpu